August 12, 2015

A Trustee May Not Use A Beneficiary Deed To Transfer A Trust Asset Because A.R.S. § 33-405 Requires The Owner Who Executes A Beneficiary Deed To Be A Natural Person

The Arizona Court of Appeals Division One filed a decision in the Matter of the Estate of Augusta A. Ganoni, Deceased on May 28, 2015. The issue on appeal was whether the “owner” who executes a beneficiary deed must be a natural person.

A.R.S. § 33-405 allows “a deed that conveys an interest in real property, including any debt secured by a lien on real property, to a grantee beneficiary designated by the owner and that expressly states that the deed is effective on the death of the owner transfers the interest to the designated grantee beneficiary effective on the death of the owner subject to all conveyances, assignments, contracts, mortgages, deeds of trust, liens, security pledges and other encumbrances made by the owner or to which the owner was subject during the owner's lifetime.”

In this case, during 2003 the owner transferred her interest in the real property from herself, a single woman, to herself as trustee of her revocable trust. Later that year, she executed a Beneficiary Deed in her capacity as trustee to another individual upon her death. She later amended her trust and she resigned as trustee. Then, the owner restated the trust, she renamed the successor trustee and she amended the beneficiary designations. The owner died shortly thereafter.

Litigation ensued regarding ownership of the real property: the successor trustee of the trust or the designated beneficiary listed upon the Beneficiary Deed. Courts interpret statutes based upon the language therein. If a statute is clear, the plain meaning must be followed.

A.R.S. § 33-405 is clear and requires a natural person to be the transferee of property “effective on the death of the owner” and subject to any encumbrances “made by the owner or to which the owner was subject during the owner’s lifetime.” A natural person dies. A trust terminates. The statute is clear.

If a person wishes to utilize a Beneficiary Deed rather than their trust to transfer property upon their death, they should transfer the real property from the trustee of their trust to themselves as individuals prior to executing the Beneficiary Deed.